Fees for Lehman bankruptcy surpass $2B, a record

Lehman Bros., the investment bank that failing and helped spark the 2008 financial crisis, made more history by paying $2 billion in fees to outside professionals involved in its bankruptcy.

The company spent $160.8 million in fees since emerging from bankruptcy in March, it said in a Thursday filing in with the U.S. Bankruptcy Court in New York. On top of the $1.89 billion it spent during the bankruptcy process, which began in September 2008, that adds up to $2.05 billion.

The filing was reported Friday by The Wall Street Journal. The fees make Lehman's the costliest bankruptcy in the nation's history, the Journal said.

The biggest share of the money went to Alvarez & Marsal LLC, a consulting firm that managed Lehman on an interim basis. The firm netted a total of $626.8 million.

Among the other big winners in the fee bonanza were Milbank, Tweed, Hadley & McCloy LLP — lead counsel for the creditors that were owed money when Lehman entered court protection — and Jones Day, one of several law firms Lehman hired for special categories of litigation.

Lehman's bankruptcy filing on Sept. 15, 2008 was the biggest in U.S. history. When the bank collapsed, it had nearly double the assets of the runner-up, retail bank Washington Mutual. WaMu failed less than two weeks after Lehman, as the dominoes of the financial crisis fell.

Lehman's failure is seen as the turning-point in the financial panic that spiraled into the worst economic contraction since the Great Depression. Banks and other financial players didn't know which companies might face big losses from Lehman. They stopped lending to each other and striking the deals that keep credit flowing to people and businesses.

By letting Lehman file for bankruptcy protection rather than saving it, the government spooked other banks. Many expected a government-brokered rescue, on the theory that Lehman was too big and interconnected to be allowed to fail.

The bankruptcy cast a long shadow of uncertainty. Stabilizing the financial system required years of bailouts, extraordinary intervention by the Federal Reserve and trillions in subsidies to financial companies.